Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Question - Immunization of a Portfolio to satisfy a single liability: Bond Analysis. Companies/Investors often buy bonds to meet a future liability or cash outlay. Such an investment is called a dedicated portfolio since the proceeds of the portfolio are dedicated to the future liability. In such a case, the portfolio is subject to reinvestment risk. Reinvestment risk occurs because the company will be reinvesting the coupon payments it receives. If the YTM on similar bonds falls, these coupon payments will be reinvested at a lower interest rate which will result in a portfolio value that is lower than desired at maturity. Of course, if interest rates increase, the portfolio value at maturity will be higher than needed.
Suppose Ice Cubes Inc. has a liability of $100 million due in five years and the company is going to buy 5 year bonds today in order to meet this future liability.
a) At the current YTM of 8 percent, what is the face (market) value of the bonds the company has to purchase today in order to meet its future obligations? Assume the desired bonds carry a coupon rate of 5.5% and how many bonds could be purchased given the standard par value of $1000?
b) If interest rates in the market remain unchanged for next 5 years, what will be the value of the portfolio?
c) Suppose that immediately after the ICI buys the bonds interest rates either fall or rise by 1%.
Required - What will be the value of the portfolio in 5 years under these circumstances?
Shapland Inc. has fixed operating costs of $500,000 and variable costs of $50 per unit. If it sells the product for $75 per unit, compute break-even quantity
Prepare the appropriate adjusting entry for vacations earned but not taken in 2011.
What is the cost of equity raised by selling new common stock? (hint: use rs = (D1/P0) X100+(g) or P rs = (D1/P0) X100+(P1-P0)/P0 X100)
Complete the problem statement for your course project. You should discuss the topic problem for your term paper and a minimum of three to five problems.
Relevant cost and revenues: changes in facilities layout To facilitate a move toward JIT production, AB Company is considering a change in its plant layout.
What is the carrying amount of the lease receivable on December 31, 2022? What is the unearned interest income on January 1, 2020?
enter the following column headings across the top of a sheet of papertransaction cash other assets liabilities paid-in
What are cheverolets 4 main financial statements? Can you show them on a flow chart? What are the expenses and revenues in the Chevy business?
Use this information and determine Alpha Company's the Net Income (Net Loss) the 2017 Fiscal Year.
Fishbone purchased the bonds to yield 11%. How much did Fishbone pay for the bonds
What is the role of social responsibility in finance for Michael Milken, Ivan Boesky and Martha Stewart
One year ago, Richard purchased 40 shares of common stock for $10 per share. What yield did Richard earn on his investment for the year
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd